Contract and Game Theory: Basic Concepts for Settings with Finite Horizons

Joel Watson

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: This paper reports the analysis of a general model of contract in multi-period settings with both external and self-enforcement. In the model, players alternately engage in contract negotiation and take individual actions. A notion of contractual equilibrium, which combines a bargaining solution and individual incentive constraints, is proposed and analyzed. The modeling framework helps identify the relation between the manner in which players negotiate and the outcome of the long-term contractual relationship. In particular, the model shows the importance of accounting for the selfenforced component of contract in the negotiation process. Examples and guidance for applications are provided.

Keywords: contract; games; self-enforcement; external enforcement; bargaining protocols; disagreement points; contractual equilibrium; hold up (search for similar items in EconPapers)
Date: 2006-02-01
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Citations: View citations in EconPapers (1)

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Journal Article: Contract and Game Theory: Basic Concepts for Settings with Finite Horizons (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucsdec:qt0wx67671

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